Corn prices pared losses after the US raised its estimate for
its harvest of the grain by far less than investors had expected, although a
bigger-than-expected increase in the soybean supply forecast hurt prices of the
oilseed.

Chicago corn futures for December, the best-traded lot, stood
at $3.66 a bushel in midday deals, down 0.6% on the day but well above a
contract low of $3.62 ¼ a bushel reached earlier.

The performance followed a long-awaited revision by the US
Department of Agriculture, in its monthly Wasde crop to report, which raised
the forecast for the domestic corn yield by 2.1 bushels per acre to 167.4
bushels per acre.

While a record, the estimate was below the figure of 170.1
bushels per acre that investors had expected.

'Localised moisture
issues'

The USDA highlighted "mostly favourable" conditions for US
corn, and soybean, crops, with temperatures remaining low.

"Reproductive to filling corn and soybeans were able to
thrive, largely due to below-normal temperatures and a lack of heat stress, as
well as the ability of crops to tap into soil moisture that had accumulated
during June," USDA officials said.

However, they also noted a "July drying trend", and "localised
moisture issues" which "caused a slight decline in condition towards the end of
the month".

With estimates for corn consumption raised both for 2013-14,
which ends this month, and 2014-15 - reflecting largely improved expectations
for exports and demand for the grain for making ethanol - the estimate for US
inventories at the close of next season was lifted by just 7m bushels.

At 1.808bn bushels, the revised stocks forecast was well
below the figure of 2.01bn bushels that the market had expected.

'Minimal supply gains'

For soybeans, however, while the USDA also raised its
estimate for the domestic yield by less than the 0.4 bushels per acre that
investors had expected, it failed to lift ideas on consumption, as many
commentators had forecast.

Wheat also struggled to recoup losses, standing 1.1% down at
$5.40 ¼ a bushel, after the Wasde raised its estimate for world stocks at the close
of 2014-15 to 193.0m tonnes, some 2.6m tonnes above market expectations.

The upgrade reflected a 6.0m-tonne hike to 59.0m tones in
the estimate for Russia's harvest, and a 1.0m-tonne upgrade for Ukraine.

"The Russia and Ukraine increases are based on harvest reports
that indicate very high winter wheat yields, especially for Russia," USDA
officials said.

More upgrades ahead

Investors said that the inability of corn futures to head
into positive territory - despite the figure for US stocks at the close of
2014-15 coming in nearly 200m bushels short of forecasts – reflected ideas that
Tuesday's yield figure was certain to be revised upwards further.

"Although it came in below the average guess, there is a
widespread sentiment among market participants that subsequent yield surveys
will find more bushels, based on heavy [corn] ear weights," CHS Hedging said.

The USDA, whose August Wasdes are the first to be based in
part on field surveys, said that the ear counts it found on crops in 10 major
producing states, including Illinois, Indiana and Iowa, were the "highest
number on record".

At Roach Ag, Brian Roach said that "we go back to trading
the final corn yield potential", which the broker says is, to judge by weather,
condition ratings, far higher than the USDA's current estimate.

"There is a potential that the US corn yield could end up somewhere between 172-174 bushels per acre."